Goodmoney CIC - Part Two (FB 11th June 2015)

A question arose. I researched and concluded thus:

It is my opinion that Goodmoney Community Interest Company (Goodmoney CIC) is only good by name and their Goodmoney Voucher business is profoundly detrimental to any local economy that engages with it. I cannot advise anyone to buy Goodmoney Vouchers or to accept them as payment.

Part two – Statements and Sums (fewer words but loads more numbers)

For Goodmoney CIC, Goodmoney Vouchers is a low risk business model with high return potential over a short to medium trading period. No loss will be suffered by Goodmoney CIC when the scheme burns out.

For givers, Goodmoney Vouchers are a stupidly expensive way to give spendable gifts.

For suppliers of goods or services, Goodmoney Vouchers are a stupidly expensive way to receive payments, being both short of sales value and delayed from the date of sale, adversely impacting profit margins, cashflow and VAT accounts. A retailer achieving modest margins on cash and card sales could have their business collapsed by this scheme if they accepted too many of these vouchers over a busy Christmas period.

Interestingly, buried deep in Goodmoney CIC’s T&C is a clear acknowledgement that operating their once-a-month payment run is detrimental to a business’s cashflow.

Is the Goodmoney Voucher scheme illegal? Not as a business but the way it is promoted might be and its qualification for CIC status might be questionable if viewed very closely

Is the Goodmoney Voucher scheme ethical? I don’t think so.

Would the Goodmoney Voucher scheme benefit the community or boost the local economy? No.

As it is both the Givers of the gifts and the Sellers of the goods who make up The Community and both groups lose out compared to giving the same gift value in cash the scheme is clearly not a boost to the economy of The Community. The scheme appears designed to do the opposite and to siphon cash out of the economy of The Community
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If you want some arithmetical proof of the above, read on.

I use the giving of a single Voucher with a “£20” face value in this example:

To buy a Goodmoney Voucher with a face value of £20.00 will cost £23.75 if you include in your order the £1.00 for a gift card and envelope and the £2.75 for signed-for delivery of the voucher to you.

The current standard price of 1st Class Signed-For Delivery by Royal Mail of a 100g letter is £1.73 and if a business can’t buy gift cards with envelopes for less than 50 pence a time they should replace their buyer.

At first glance, this appears as if Royal mail have earned £1.73, the gift card supplier has earned 50p and Goodmoney CIC have made 50p on the card and £1.02 on the delivery to you of the voucher, a profit of £1.52 from your purchase of a “£20” Goodmoney Voucher.

For those who really enjoy figures, 6.4% of your outlay has gone straight to Goodmoney CIC.

There will be some costs incurred in processing the Voucher orders but if we assume success for Goodmoney CIC such that 1000 sales of “£20” vouchers to have taken place in a period their gross profit from the sale of the Vouchers in this same period will have been £1520 and I would expect their net profit to still exceed £1000 if they are running their business efficiently.

Goodmoney CIC would suggest this additional cost to you is worthwhile to ensure your present is spent locally and benefits local businesses. If you believe them you will buy into their scheme and the £20 worth of goods the recipient of your gift buys will have cost you £23.75, 18% more than it would have cost you to give cash.

When you are mulling this over in your head, you will probably be thinking that the £20 worth of goods the person you gave the Voucher to spends it on represents £20 worth of revenue for the local business supplying the goods and that’s that, but it doesn’t.

The local business supplying the goods only receives £19 when they redeem the “£20” Voucher, even though they have handed over the full £20 worth of goods and still have to pay a VAT bill as if they had received the full £20. The missing £1 stays with Goodmoney CIC as their 5% fee to businesses.
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I’ll come back to the effects on businesses in a moment. For now I will stick to the transaction as viewed by the buyers of the Vouchers, for it is only their money that funds the scheme.

If you wanted someone to be able to buy £20 worth of goods in a local shop and you gave them a £20 note that they then spent in a local shop, you would be down £20, the person you gave the cash to would have £20 worth of goods from the shop and the shop would have £20.

Introducing a Goodmoney Voucher into the transaction doesn’t affect the person who received the gift from you as a Voucher instead of cash, they still get £20 worth of goods from the shop, but this time you are down by £23.75 and the shop only gets £19, the other £1 having being retained by Goodmoney CIC. The shop also has to wait until Goodmoney CIC’s monthly pay run before they get their £19 which leaves them out of pocket in the meanwhile.

Updating the model now you have seen the second part of the transaction, Goodmoney CIC actually take another £1.00 to add the £1.52 of net profit you already knew they were taking. Goodmoney CIC now has £2.52 of your £23.75 and the shop you thought you were supporting has not done as well as you imagined they would. In which case you have been misled.

In the end, 10.6% of what you gave to Goodmoney CIC would stay with Goodmoney CIC, not just the 6.4% of it that showed up originally.
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Wind this up to the 1000 customer model:

Giving Cash.
Gift givers give £20k, gift receivers get £20k worth of goods and the businesses supplying them get £20k of revenue to pop in the bank straight away to pay their bills.

Giving Goodmoney Vouchers.
Gift givers pay out £23.75k, gift receivers get £20k worth of goods but the businesses supplying them get only £19k of revenue and they have to wait up to a month before they can use it to pay any bills.

I can’t be sure about the detail but I would be very surprised if Goodmoney CIC hadn’t managed to hang on to at least £2.5k of your investment by the end of it, to which they would add the interest accrued on the £19k that sat in a bank from the moment the Vouchers were purchased until they were redeemed.

The sale of all subsequently lost or otherwise unspent vouchers would still earn immediate profit at the time of sale and ongoing interest on their redemption value indefinitely for Goodmoney CIC while never contributing to other business turnover locally.

[Radio debate from Goddamn Radio 8th June 2015 

https://www.spreaker.com/user/countessofbrightonandhackney/better-money-for-brighton ]